MLB, clubs near resolution on video-on-demand rights; settlement being drafted

Major League Baseball and its individual clubs are nearing a
resolution on video-on-demand rights, an issue that has steadily simmered for
nearly six months and angered TV rights holders eager to deploy the advanced
services.

What that resolution will entail precisely is not yet known,
but a settlement of some sort is anticipated that will seek to end a combative
issue that dates to August, when the Los Angeles Dodgers launched a VOD channel
with Time Warner Cable in that market.

“We’ve had discussions with the clubs and are drafting
something now,” said Bob Bowman, MLB Advanced Media chief executive, declining
to go into further detail.

MLB executives argued last fall that the Dodgers’ digital
cable channel violated a 2000 agreement between the league and the individual
clubs that established MLBAM as rights holder to the sport’s interactive media.
The Dodgers successfully appealed to continue operating their VOD service while
the issue was addressed on a leaguewide level.

The wait to establish clarity on VOD rights, however, has
angered clubs and TV rights holders who were originally promised by the league
a quick answer to the issue. Spring training for most clubs starts in about a
week, and with it comes a key marketing time to promote baseball-related
content.

“It is absolutely ridiculous that baseball has not determined
what they want to do,” one network executive said. “It’s simply because they
can’t, or won’t, determine who has what rights internally.”

Over recent months, the VOD dispute has fallen into something
recalling the sport’s classic big-market, small-market internal debates of the
late 1990s. Big-market clubs, such as the Dodgers, are eager to generate
revenue from initiatives such as interactive TV in their home markets.
Small-market clubs, conversely, in many instances stand to gain more revenue
from profit sharing in the centralized model used for the rest of MLBAM
operations.

One executive at a small-market regional sports network spoke
of trying to convince the local MLB team owner to push for a resolution so they
could control digital rights in their market.

“Once we looked at the numbers, though, we saw that we would
get more money from [MLBAM] than if we were to go out on our own,” the
executive said.

The big-market TV rights holders and clubs argue that they
should have control within their respective market areas.

“If you bought your club and you bought that market area, why
would some third party own the rights to your product in that market?” one TV
executive asked. “Why would they be able to come in and take the things that
you’re producing and monetize them in your own home market? That doesn’t make
any sense. So what you see is nobody, right now, taking advantage of those
rights.”

Said Camille Johnston, Dodgers senior vice president of
communications, “We’ve continued to work with MLB on this issue. We’re still on
the air, and we think this is absolutely a great amenity for our fans and
something we look forward to continuing to provide.”

Baseball currently is the only major sport that doesn’t make
its programming available via VOD and it has restrictions in place that keep
most RSNs from putting highlights on their Web sites. RSN executives are
worried that fans are finding their baseball content online via sites that have
no MLB affiliation. For example, a quick search of YouTube last week uncovered
several baseball highlights that RSNs are not allowed to show.

“If we get caught up in [territorial issues], the consumer in
that case will find his own way,” one executive said. “That’s not good for any
of us.”